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Asian stocks are following Wall Streets bloodbath as the US-China trade war heats up

Jianan Yu/Reuters

Asian stocks fell on Monday as traders followed Wall Street’s example and braced themselves for a prolonged trade war.

The worldwide sell-off reflects fears of slower economic growth and rising geopolitical tensions, as China plans to respond to a US tariff hike last Friday by raising duties on American imports.

“Market sentiment remains very fragile,” said one analyst.

Traders in Asian stocks followed Wall Street’s example and braced themselves for an enduring trade war.

After major indexes in the US plummeted at least 2% on Monday, Chinese and Japanese stocks followed suit. European equities and US futures are posting relief rallies on Tuesday morning.

“Market sentiment remains very fragile,” said Jasper Lawler, head of research at London Capital Group. “Investors will want to see concrete evidence of progress after Trump’s 180-degree turn last week spooked the markets.”

Trade war fears spooked US investors, sending the Dow Jones Industrial Average and S&P 500 down at least 2%. The Nasdaq plunged 3.5%. US stocks are poised to open higher on Tuesday. Futures on those indexes are up at least 0.3%.

China plans to raise duties on around $60 billion of American imports on June 1, in retaliation to the US raising tariffs from 10% to 25% on $200 billion of Chinese imports on Friday.

The Trump administration is preparing to expand tariffs to a further $300 billion of Chinese goods, although the president hasn’t ruled out a trade deal and plans to meet his Chinese counterpart at next month’s G-20 summit.

“You never really know, right?” Trump replied when asked about the prospect of a trade agreement, according to Bloomberg. “But I have a feeling it’s going to be very successful.”

“Markets are likely to take Trump’s words with a few pinches of salt, given the many situations in the past which have not resulted in the easing of trade tensions,” said Lukman Otunuga, a research analyst at FXTM.